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Labour Markets and Productivity in Developing Countries

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  • Mathan Satchi
  • Jonathan Temple

Abstract

In middle-income countries, the informal sector often accountes for a substantial fraction of the urban labour force. We develop a general equilibrium model with matching frictions in the urban labour market, the possibility of self-employment in the informal sector, and scope for rural-urban migration. We investigate the effects of different types of growth on wages and the informal sector, and the extent to which labour market institutions can influence aggregate productivity. We quantify these effects by calibrating the model to data for Mexico.

Suggested Citation

  • Mathan Satchi & Jonathan Temple, 2008. "Labour Markets and Productivity in Developing Countries," Studies in Economics 0805, School of Economics, University of Kent.
    • Handle: RePEc:ukc:ukcedp:0805
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    More about this item

    Keywords

    informal sector; urban unemployment; dual economies; matching frictions;
    All these keywords.

    JEL classification:

    • J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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